Contract Manufacturers Are Joining Apple's Side As Qualcomm Legal Concerns Continue

The Apple Inc. AAPL and QUALCOMM, Inc. QCOM legal concerns continue, and new smartphone manufacturers are jumping to Apple’s side.

What Is The Court Case All About?

It all started when Apple went after Qualcomm for charging overpriced licensing fees and violating anti-trust regulations. The case has been heavily talked about as Apple drives almost a quarter of Qualcomm’s revenue, yet Qualcomm has still been able to overcharge Apple.

Contract Manufacturers Are Coming to Apple’s Side

“Apple’s CMs (contract manufacturers — Foxconn, Compal, Pegatron, and Wistron) filed a complaint against Qualcomm, joining Apple in challenging Qualcomm’s licensing practice of ‘double dipping’ and excessive royalty charges,” said Wells Fargo analyst Maynard Um (see his track record here).

“The CM’s claim that Qualcomm ‘double dipped’ by requiring additional royalty payments on top of the chip’s purchase price. The court filings indicate the CMs signed addendum agreements with Apple under which Apple agrees to indemnify the CMs of liability related to the Qualcomm claims.”

The hearing is scheduled for mid-August and Qualcomm has said that it expects to continue to supply chips and for the company to find a resolution. “We expect the legal battles to continue to be an overhang,” Um said.

Qualcomm Extends Fight In German Courts

“Qualcomm yesterday (7/19) extended its complaints against Apple into Germany (Munich and Mannheim courts), filing two complaints and asking the courts to suspend sales and ban imports of the iPhone based on two patent infringements,” Um said.

He does not see these actions as surprising as most high-profile patent disputes go to German courts. Overall, Um maintains his $140 price target on Apple with a Market-Perform rating.

At time of publication, shares of Qualcomm were down 5.04 percent at $53.92. Apple shares were flat on the day at $150.98.

To read more about the Qualcomm and Apple legal battle, visit the Benzinga Pro news feed.

Related Link: Legal Battles, Merger With NXP Set Up Catalysts For Qualcomm This Year _______ Image Credit: By Rwendland (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons